Group Seeks Control of Kansas City Southern

An investment group that owns 11% of Kansas City Southern Industries said Monday that it was offering $60 a share, about $594 million, for the rest of the railroad concern’s common stock and threatened a proxy fight if the offer is not accepted.

Kansas City Southern, which also has interests in financial services, said its board would consider the all-cash proposal soon at a special meeting.

The company has nearly 11.1 million shares outstanding, of which the investment group, led by Howard Kaskel, claims to control about 1.2 million.

In trading on the New York Stock Exchange, Kansas City Southern jumped $8.75 a share Monday to $55.

Kaskel outlined the merger proposal in a letter to Landon H. Rowland, president and chief executive of Kansas City Southern, and asked for an opportunity to negotiate “all aspects of the offer, including price.”

He warned that if the company’s board rejects or fails to act on the offer by April 4, “we will be forced to commence a proxy contest to elect directors who will actively pursue and encourage the maximization of stockholder values.”

Obstacle Course

Completion of the proposed deal would be subject to reaching a definitive agreement, approval by directors, stockholders and regulators.

Kaskel said he had made various proposals to company management over the past eight months on ways to increase shareholder values. “Unfortunately,” he added, “you have rejected each of my suggestions.”

He said the Kansas City Southern board had erected obstacles “designed to entrench itself and to prevent stockholders from realizing a full return on their investment.”

Among these actions, Kaskel cited the recent issuance of about 1.4 million shares, then almost 15% of the company’s outstanding common stock, to employee stock ownership plans at $49 a share.

“This could only have been motivated by the board’s desire to place substantial voting power in its hands as a means of opposing” proposals that may be brought before its shareholders, the letter said.

Will Consider Bid

Kaskel also cited Kansas City Southern’s continued efforts to acquire the Southern Pacific railroad despite Southern Pacific’s “binding agreement for its sale to the Denver Rio Grande.” That deal is awaiting approval by the Interstate Commerce Commission.

Responding to the offer, Rowland said in a statement from company headquarters in Kansas City, Mo., that Kaskel’s proposal would be considered by the company’s board “at a special meeting to be held shortly.” The company would have no further comment, he said, until the board has an opportunity to study the proposal.

Kansas City Southern owns the Kansas City Southern Railroad, which operates on about 1,500 miles of track in Missouri, Arkansas, Oklahoma, Kansas, Louisiana and Texas. It also owns 87% of DST Systems, a Kansas City concern that provides data systems and record-keeping services for mutual funds, insurance companies and other financial services providers.

The company also owns 80% of Janus Capital, a Denver firm that provides investment advice and had about $915 million in funds under management at the end of February, according to Albert Mauro, Kansas City Southern’s vice president and secretary.